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What is Asset Finance?

Published on 9th August 2018 - Last update on 12th September 2018

Keeping your business’ operations running has never been a simple undertaking. As well as hiring trained staff and maintaining sufficient supply levels, you also need access to the latest equipment in your sector. However, the cost of expanding or replacing ageing equipment is often very expensive and may push you into financial difficulty were you to use your own savings. That’s why, in order to overcome this challenge and continue producing quality goods and services, more and more UK business owners are choosing to apply for Asset Finance. Asset Finance is a specialised package which gives you access to a variety of Secured finance solutions that are dedicated to helping your business gain access to the equipment it needs to succeed. But in order to receive a suitable agreement for your business, you must ensure that you’re fully aware of each of the products that are available.

Hire Purchase

For many businesses, Hire Purchase presents a great way of gaining access to valuable equipment and eventually gaining ownership. As such, this could be a useful option to consider if the asset in question doesn’t depreciate quickly or become obsolete as new models are released. It works by the lender purchasing the equipment you’re requesting from a trusted supplier and allowing you to make use of it once you have the settled the initial deposit, which involves the equipment’s full VAT and an agreed percentage of its total purchase price (e.g. 10%), subject to negotiation. As soon this has been paid to the ender you can begin using the equipment in and around your business, whilst making Fixed Monthly Repayments plus interest across an agreed term that could last up to 5 years. When the agreement matures, with all relevant payments resolved, ownership of the equipment is transferred to your business.

However, if you fall behind in the repayment scheme the lender will gain the right to repossess and remove the equipment from your premises. Although this won’t affect any of your other assets, you will lose your deposit and any of the funds that you’ve paid into the agreement.

Need access to new or used assets for your business? Worried about the pressure that this places upon your finances? Apply for Asset Finance or learn more about how your business could benefit.

Leasing

On the other hand, if you’re considering acquiring equipment that has a rapid rate of depreciation or will only be required for a limited period of time, Leasing might be a more viable solution. Leasing offers you the means to borrow equipment for your business during an agreed term that could last up to 5 years. However, if the asset is particularly expensive, some lenders may be willing to provide an agreement for up to 7 years. During this time, you’re required to make Fixed Monthly Rental Payments plus interest that take into account the equipment’s current worth and it’s residual value once the agreement matures. When you reach the end of a Leasing agreement, you have 3 options. You can either return the asset, extend the agreement or upgrade to another model.

Just remember that if you fall behind in the repayment scheme whilst the agreement is in effect, the lender will remove the asset from your premises.

Asset Refinance

Finally, if your business currently possesses unencumbered assets such as equipment, machinery or vehicles (that aren’t fixed into the structure of your premises), you could release up to 100% of the equity contained in 1 or more of these assets to generate a lump sum. Because funding is based on the worth of your business’ assets there’s no limit to how much you could borrow. It’s also not subject to any usage restrictions, meaning that this solution could be used to support any aspect of your business, including the purchase of equipment. If this sounds like a product that could benefit your business, know that Asset Refinance usually offers terms extending up to 5 years, during which you’ll need to make Fixed Monthly Repayments plus interest.

However, because Asset Refinance is secured against any asset that you’ve chosen to release equity from, the asset involved will be at risk of repossession should you fall behind in the repayment scheme.

Could your business benefit from Asset Finance?

Every day you rely on a wide range of assets to maintain your day-to-day operations. However, over time you may need to expand, replace or upgrade the assets you possess. The problem is that this can be very expensive, needing you to draw upon your own savings or divert funds from other areas of your business. Naturally, this can cause any number of problems. But, there is a solution. Asset Finance offers you a variety of ways to help you achieve your equipment goals. All you need to do is source the most appropriate solution for your business’ needs.

At Rangewell, we’re an Access to Finance specialist who’s mapped over 400 lenders to offer you an overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide you through the application process. So if you’re looking for a cost-effective means of obtaining essential assets for your business, apply for Asset Finance today or find out more with Rangewell.


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David Harrison

David Harrison

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